Deeper GVC integration, FTAs key to boosting India's exports: Deloitte

Anil Talreja, Partner, Deloitte India, said India needs to work on reducing logistics costs via multimodal export corridors by focusing not only on infra but also on end-to-end supply chain efficiency

Deepening integration into global value chains (GVCs), strengthening supply chain resilience and enhancing utilisation of free trade agreements (FTAs) are key to boosting the country's exports and high-end manufacturing, according to Deloitte India.

Anil Talreja, Partner, Deloitte India, said India needs to work on further reducing logistics costs through multimodal export corridors by focusing not only on infrastructure creation but also on end-to-end supply chain efficiency.

Besides, priority should be given to lowering costs associated with port handling, transportation, warehousing, rail connectivity, container availability, and last-mile logistics.

He suggested setting up a 'Response Cell' to monitor and analyse changes in standards, carbon-border adjustment measures (CBAM), product regulations, sustainability and traceability requirements, sanctions, and other emerging trade-related requirements in major export markets.

 

"India's next phase of export-led manufacturing must move beyond scale and assembly towards technology, value addition and deeper integration into GVCs," Talreja said, adding that the focus should be on high-potential sectors such as electronics and semiconductors, pharmaceuticals, capital goods, defence and aerospace, speciality chemicals and clean technologies.

The recent FTAs finalised by India can be leveraged as an important enabler of this process, providing access to competitively priced intermediate inputs, technology, investment and large export markets, while creating opportunities for Indian firms to integrate into supply chains of the partner, he added.

Deloitte India stated that India should assess vulnerabilities in critical supply chains, including dependence on key inputs, supplier concentration and geopolitical risks, and reduce them through alternative suppliers, technology partnerships, domestic production and strategic reserves.

It also called for aligning free trade agreements with the country's industrial strategy to attract investment, develop manufacturing ecosystems and widen export opportunities.

Rationalise tariff structures by revisiting inverted duty structures that increase input costs and reduce export competitiveness, it said.

For MSMEs, it suggested that the government support the segment in complying with rules of origin, standards and documentation requirements to make better use of preferential tariffs under free trade agreements.

MSMEs account for about 48.58 per cent of India's total exports and 45 per cent of the country's manufacturing.

He also suggested addressing certain challenges being faced by MSMEs, such as access to affordable trade finance.

"MSMEs often face challenges in securing pre- and post-shipment credit due to limited collateral, credit history, and export track record, resulting in higher financing costs. High exposure to payment and currency risks: Long export payment cycles and fluctuating exchange rates can adversely affect cash flows, pricing competitiveness, and profitability," Talreja added.